China is considering new rules for the country’s small-to-medium financial institutions to reduce risk in the wider economy, following a number of state bailouts of smaller lenders, said the state-run Economic Information Daily, reported Reuters.
The report, citing a source in the People’s Bank of China(PBoC), said the rules could require high-risk financial institutions, local governments and the country’s regulators to jointly take on the responsibility of risk resolution for smaller banks. The PBoC, the country’s central bank, would also encourage merger talks, instead of bankruptcies, when dealing with problematic financial institutions, the report added.
A government-led takeover of Baoshang Bank in May was the first in a series of rescues, including of the Bank of Jinzhou, which received backing from three state-controlled financial institutions including the country’s largest lender Industrial and Commercial Bank of China (ICBC).